Call for Proposals – Implementation Agreement for Leveraging Microfinance for Economic Recovery and Job Creation: Expanding Access to Finance for MSMEs and Youth early-stage Start-Ups in Lebanon

Lebanon had a stable and growing microfinance industry with an annual portfolio increase of 13% on the number of clients and circa 20% in outstanding portfolio. It counted a dozen of institutions, legally formed as NBFIs, NGOs, or cooperatives. The sector catered to a significant portion of the low-income population, including refugees. Concretized with an outreach to 170,000 clients by the end of 2018, the microfinance sector hereby directly and indirectly impacted over 760,000 people or around 17% of the Lebanese population mostly vulnerable low income.

The compounded crises since 2019 - including economic collapse, currency devaluation, banking restrictions, and regional conflict - have severely impacted the Lebanese microfinance sector, leaving it insolvent.

In response, ILO partnered with a leading Microfinance institution in Lebanon in late 2022 to pilot a farmer‑focused credit scheme in the North and Beqaa. The pilot extended approximately USD 1.35 million to 419 farmers to finance inputs and energy solutions - helping them bypass costly middlemen and stabilize production. Portfolio performance has been strong (with PAR 30 reported at very low levels), reinforcing the conclusion that liquidity, when responsibly deployed through vetted MFIs and appropriate loan products, can catalyse MSME stabilization and growth.

ILO’s Microfinance sector assessment conducted by ILO in July 2025 indicated that all MFIs experienced severe disruptions and sustained major portfolio losses, while some institutions exited the market. The nature and intensity of the impact varied depending on size, legal status, and geographic focus:

• MFIs saw dramatic portfolio shrinkage from USD 185 M in September 2019 to around USD 17 M in December 2024 - around 90% in real terms - due to currency devaluation and suspended lending. Some institutions wrote off most or all of their portfolios - others paused disbursements at the onset of the crisis.
• The total number of active microfinance borrowers dropped sharply, from over 132,000 in September 2019 to around 35,000 by December 2024 – a decline of 73%.
• This was coupled with a dramatic deterioration in portfolio quality across the sector – Pre-crisis Portfolio at Risk (PAR) levels below 1% peaked at >40%. Most institutions implemented diverse response strategies to preserve operations, serve clients, and remain operational. Lately, MFIs managed to restore good PAR levels, however the recent conflict last year eroded the stable portfolio trend for some MFIs working in the affected zones.
• The study found that liquidity constraints have been one of the most severe and persistent challenges faced by MFIs in Lebanon to enable them to properly recover, serve clients, and reach sustainability levels.

The assessment confirmed a persistent, unmet demand for microcredit among MSMEs in all economic sectors. The assessment concluded that the binding constraint is not demand, but a scarcity of fresh, risk‑tolerant liquidity to reignite responsible on‑lending by credible MFIs. With various configurations and coping tactics, the MFIs that have managed to stand on their feet and resume operations are still nascent and require a combination of support mechanisms to reverse the magnitude of the crisis.

Building on the Microfinance sector assessment results, and in close collaboration with UNICEF, UNHCR and IFC, a new opportunity fund was approved recently that aims at expanding access to finance for MSMEs and youth, while targeting the inclusion of FDPs. This TOR is proposing implementation partnership with a national MFI to provide access to finance for youth-led early-stage startups established under UNICEF’s GIL centres but also for other MSMEs in Lebanon, especially in the digital sector.

In this context, it’s important to mention that ILO PROSPECTS program adopts an integrated approach for enterprise development and access to finance interventions, which links non-financial services with access to finance.

ILO is training entrepreneurs (especially youth and early-stage start-ups) on advanced concepts related to business planning and management and financial concepts to allow them to better manage their enterprises and finances. It is therefore of utmost importance to strengthen the liquidity for the Lebanese MFIs to respond to the needs of the trained MSMEs, thus help realize their growth potential. The economic and social returns to supporting MSME credit are compelling: a revolving sustainable mechanism that supports local businesses recovery; jobs are retained and created; and vulnerable households regain income stability.

It is through this rationale that the ILO is looking to support MF sector through capital injection and technical support. Recognizing the economic and financial constraints in Lebanon, ILO will support a Lebanese MFI with capital injection, which can be used to leverage more funding for MSMEs and address the liquidity shortages faced by MFIs.

Objective

The overall objective of this TOR is to restore sustainable access to finance for MSMEs, which currently represents a critical bottleneck hindering their growth, resilience and job creation. The specific objective is to establish a partnership with Lebanese MFI through an ILO injected fund, which will be leveraged at least at a ratio of 1:2, thereby expanding the volume of affordable finance available for youth and MSMEs. This will take place through designing a product to serve youth and MSMEs with focus on promising sectors that has job creation potential.

Scope of Work

Accordingly, the Implementing Partner (IP) is expected to undertake the following to achieve the program objectives:

1. Hire an international consultant to undertake market research and understand the needs of the youth group and design appropriate financial products that meet those needs:
2. Leverage the allocated funds: ILO will allocate USD 1.2 M to the MFI to provide loans exclusively on a revolving basis and it expects the MFI to match these funds with at least equal amount reaching a total portfolio of USD 2.4 M. The MFI is expected to deploy this portfolio in lending, targeting at least 500 clients including youth early-stage start-ups and existing MSMEs. This amount is complemented by the ILO with USD 200,000 to be used as an incentive for youth product and Syrian refugee inclusion to incentivize timely repayment.
3. Promote the loan product/s, establish a rigorous referral mechanism with UNICEF partners, receive applications, and filter/appraise the applicants 
4. Utilize the fund (min of USD 2.4 M) to exclusively disburse loans for eligible targeted Youth and MSME clients in line with the agreed parameters
5. Follow-up, documentation, M&E and reporting

Required Qualifications

Prerequisite for selection: a registered MFI in Lebanon as a non-profit organization/entity that can provide a contribution that matches at least 100% of ILO’s fund earmarked for the loans. 

Eligibility Criteria:

• Well established MFI in Lebanon with an active client portfolio of more than 10,000 clients by the end of 2024.
• MFI with presence (physical branches and/or staff fully operating) in North Lebanon, Beqaa and Baalback-Hermel and Beirut.
• MFI with a decentralized team structure formed of Regional managers and branch loan officers
• Team Leader with a minimum of 10 years of professional experience including rigorous experience in managing new loan products, knowledge of financial tools, along with strong communication skills.
• Knowledge of the local Lebanese context, culture and language
• Previous experience or partnerships with UN agencies and INGOs is an advantage